American Airlines, United to Cut 32,000 Jobs as Washington Debates Relief

Date: Thursday, October 1, 2020
Source: Wall Street Journal

American Airlines Group Inc. and United Airlines Holdings Inc. will go forward for now with a total of more than 32,000 job cuts Thursday after lawmakers were unable to agree on a broad coronavirus-relief package, the airlines told employees.

The airlines’ moves put more pressure on lawmakers who have negotiated on and off for months over an aid package that could include relief for airlines and other hard-hit industries like restaurants and small businesses. Both carriers said they would bring workers back if a deal is reached in the next few days.

“We implore our elected leaders to reach a compromise, get a deal done now, and save jobs,” United said Wednesday night. The airline said over 13,400 employees will be out of a job starting Thursday.

American, which has planned deeper cuts than any other carrier, also told Treasury Secretary Steven Mnuchin that it will bring its 19,000 workers back if lawmakers can approve more aid in the next few days, Chief Executive Doug Parker told employees in a letter. Airlines considered postponing their cuts—something Mr. Mnuchin urged them to do earlier Wednesday.

But Mr. Parker said too much uncertainty remained.

“I am extremely sorry we have reached this outcome. It is not what you deserve,” he wrote to employees.

Conditions attached to airlines’ $25 billion in earlier government aid—approved as part of a broad economic package passed in March—had largely insulated their workers from the effects of deep declines in travel.

That aid was meant to help airlines manage through what they hoped would be a temporary crisis without resorting to mass layoffs. While air-travel demand has climbed from the depths it reached in April, it remains nearly 70% lower than a year ago. Analysts forecast that U.S. airlines will lose $30 billion this year, according to FactSet data.

So while tens of thousands of workers opted to retire early or took buyouts as airlines scrambled to cut spending, most have been able to stay in their jobs until now.

Airlines have raised billions of dollars from capital markets and in some cases from additional government loans, and are in little danger of imminently running out of money. But they say they don’t want to pay workers they don’t need while they are burning through millions of dollars a day and flying a fraction of their usual schedules.

Airlines and their labor unions have lobbied aggressively for another $25 billion to pay workers for another six months, and continued the push into the final hours of negotiations on Wednesday.

While Republicans and Democrats both supported aid to airlines and several other items under consideration, they have remained split on other issues and have been unable to come to terms on how much to spend overall.

Mr. Mnuchin and House Speaker Nancy Pelosi (D., Calif.) renewed their stalled negotiations this week, though they failed to reach an agreement Wednesday afternoon. Still, Democrats and the White House continued to seek common ground. The House of Representatives opted to delay a vote on a $2.2 trillion coronavirus-aid package, which Democratic aides said would allow the two sides to keep talking. As it stands now, the legislation has no chance of passing in the Senate.

Labor unions, whose members have picketed and inundated lawmakers with letters and tweets, also said they plan to continue ratcheting up their efforts.

American and United account for the bulk of the job cuts scheduled for this week, though a few other carriers have planned smaller reductions. Allegiant Air said it remained optimistic and decided to hold off on the 275 job cuts it had planned. Hawaiian Airlines said it would go ahead with its furloughs.

Several airlines have whittled down the number of jobs they plan to cut, offering buyout and early-retirement offers and striking deals with unions to cut costs. Some, including Southwest Airlines Co., aren’t planning any furloughs at all this week, though they have warned they might not be able to avoid them indefinitely without aid.

United, which initially warned 36,000 workers that their jobs were at risk, struck a deal to delay any furloughs of pilots until June.

Both United and American are set to receive larger-than-expected loans from the Treasury under a government loan program set up in the Cares Act passed in March, separate from the aid for worker salaries. United said Wednesday that it has secured a $5.17 billion term-loan facility and has been told the Treasury will increase that to as much as $7.5 billion. United said it had already drawn $520 million. American said last week it had secured a $5.5 billion loan facility that could also be increased to $7.5 billion.

Lawmakers have also introduced a pair of bills in the House and Senate that would focus solely on aid for the aviation industry, which could gain more traction in the coming days, though some industry observers have said it might be more difficult to pass legislation that benefits only one industry.

For workers, the last-minute wrangling has added to months of uncertainty about their futures. “I’m scared,” said Leo Valladares, a flight attendant set to be furloughed this week. The coronavirus outbreak in Asia was barely on his radar when he began training in February after two years with a smaller carrier. Now he is faced with spending his savings as he looks for work.

“I thought it was going to be a steady job,” he said.

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